TransCanada Aims to Build Southern Leg of Keystone Pipeline

(Reuters) - TransCanada Corp said on Monday it aims to build the southern leg of its $7 billion Keystone XL oil pipeline first, skirting a full-blown federal review and heightening competition to move crude out of the glutted Cushing, Oklahoma, storage hub.

TransCanada said it wants to have the southern portion of the 830,000 barrel a day pipeline, running to Texas refineries on the Gulf Coast, in service by mid- to late 2013. The approximate cost is $2.3 billion.

The company had broached the idea of building the controversial Alberta-to-Texas project in stages before, most recently after President Barack Obama rejected Keystone XL in January, saying it needed further environmental reviews.

One benefit to TransCanada of building the Cushing-Texas portion first would be that approval by the U.S. State Department would not be needed, as the line would not cross the Canada-U.S. border. It will require other regulatory approvals, however.

TransCanada also said it sent the State Department a letter detailing its plans to file a new presidential permit application for northern part of the project.

Our application will include the already reviewed route in Montana and South Dakota, TransCanada chief executive Russ Girling said in a statement. The over three year environmental review for Keystone XL completed last summer was the most comprehensive process ever for a cross border pipeline.

Based on that work, we would expect our cross border permit should be processed expeditiously and a decision made once a new route in Nebraska is determined.

The overall project stalled at the State Department level in January as environmental objections over the pipeline's route and increased development of the Alberta oil sands boiled over, raising difficult political problems for Obama as the election year got under way.

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